Financial: Intuit Reports Second Quarter Performance - Company Financial Information

Edge: Work-Group Computing Report, March 1, 1999

Intuit Inc. (NASDAQ: INTU) Thursday announced the financial results for its second fiscal quarter ended January 31, 1999. Intuit reported second quarter revenue of $346.0 million, an increase of 46% compared to the same quarter a year ago. Revenue associated with professional tax software sales by Lacerte, which was acquired in June 1998, was included in these results and not in the year-ago quarter. Excluding the revenue from its Lacerte subsidiary, the Company posted a 24% gain compared to the same quarter a year ago. On a GAAP basis, the Company reported net income for the quarter of $89.9 million, or $1.42 per share, which included gains from the sale of marketable securities totaling $10.1 million. Net income for the same fiscal quarter last year was $41.8 million, or $0.85 per share. (See Table A) On a pro forma basis, the Company reported second fiscal quarter net income of $84.8 million and earnings per share of $1.34, which was up 41% from the same fiscal quarter last year. These results reflect Intuit's typical strength during the tax season and the acquisition of Lacerte. Pro forma net income for the same fiscal quarter last year was $47.0 million, or $0.95 per share. (See Table B) During the second quarter, Intuit experienced strong growth in its personal tax products, along with new business from the Lacerte acquisition. In addition, the Small Business Division, benefiting from the early launch of QuickBooks 99 in January, contributed to the strong performance in the quarter. Intuit's financial results reflect the highly seasonal nature of its businesses, particularly its tax return preparation products. Historically, revenue and profitability are highest in the January quarter which reflects the short season and intensity of tax product sales. The Company experiences significantly lower revenue in the April, July, and October quarters, while operating expenses to develop new products and services continue during these periods. As a result, Intuit typically produces more than 100% of its annual profits in the January quarter. The GAAP financial results are prepared in accordance with generally accepted accounting principles and are shown in Table A. Pro forma financial information shown in Table B excludes gain on disposal of business, restructuring charges, non-recurring marketing charges, acquisition-related charges, and gain on sale of marketable securities. Business Highlights Bill Harris, President and CEO, commented, "We continue to benefit from our proven success in desktop software, led by the solid performance of our small business and tax products. Equally important, more than 50% of our second quarter revenue was repeat in nature. In a business that is historically seasonal, this annuity revenue is a valuable asset." "For the sixth quarter in a row, Quicken.com page views hit record levels," added Scott D. Cook, Chairman of the Executive Committee. "January traffic reached 164 million page views, up 52% in one quarter and more than triple last January's levels. We have also achieved significant increases in advertising and transaction revenue, with overall Internet commerce accounting for 10% of our second quarter revenue." Small Business Gains Momentum Intuit's Small Business Division gained momentum on several fronts: QuickBooks 99 launched, attracting new customers and increased revenue Web-based payroll service processed $60 million in gross payrolls to date Tax table orders were up 24% on early subscription demand QuickBooks Support Network revenue tripled versus the prior year In January, Intuit launched QuickBooks 99 well ahead of schedule and registered 80,000 new users in its first month. QuickBooks 99 offers complete multi-user based integration with Microsoft Word and Microsoft Excel. QuickBooks is also the nation's top selling small business accounting software and commands over 80% share of dollars at retail according to PC Data for January. In addition, QuickBooks has won major awards including PC Computing MVP and Windows Win100. Internationally, Intuit is seeing the early results of its small business focus. In October, Intuit KK launched the first version of QuickBooks in Japan. In just a few months, Intuit has increased its overall share of dollars at retail from 58% prior to launch to 69% at the end of January. The recently launched Internet-based payroll service also continued to build momentum, adding customers at an increasing pace. Initial market response has been enthusiastic. Intuit is also growing the payroll service market, as approximately 70% of the Company's current payroll customers previously prepared and filed their payrolls themselves. The Tax Table business, which provides tax table data to small businesses for payroll calculations and is Intuit's oldest small business service, recorded a 24% increase in revenue when compared to the same quarter a year ago. In addition, second quarter revenue from technical support plans offered by the Quickbooks Support Network grew 229% compared to the same quarter a year ago. Many of the small business initiatives, while still in the early stages, represent opportunities to extend the business and at the same time drive increased revenue from an installed base of over 2.4 million users. Largest Retail Launch For TurboTax Intuit's market-leading TurboTax is off to a strong start. This year's launch on December 2 was the largest in the Company's history with over 2 million units shipped to retailers in the first two weeks. Initial results indicate that Intuit has been successful in converting customers to higher-end offerings, with more than half choosing these products. Intuit's ProSeries and Lacerte tax products also launched in the second quarter, reaching over 70,000 professional tax preparers. Combined with TurboTax, Intuit products now account for one out of every five individual tax returns filed with the IRS. Intuit's Web-based tax preparation and electronic filing efforts also launched this quarter. On January 20, the Company launched WebTurboTax, a tax preparation capability that delivers the complete functionality of Intuit's shrinkwrap TurboTax - entirely on the Web. In addition, Money Magazine described WebTurboTax as an important new tax preparation option. Also in January, the Company turned on its electronic tax filing system. By the end of the month, over 93,000 returns had been filed electronically by consumers, representing an increase of 166% over the same time last year. While initial indications of this year's tax launch are encouraging, Intuit expects an aggressive competitive response and it remains too early to predict results for the entire tax season. Quicken Rated Best Personal Finance Software Quicken remains the clear favorite of personal finance software purchasers at retail. As of January 31, Quicken was the top selling personal finance software, with consistently greater than 70% share of dollars at retail for its category according to PC Data. Quicken 99 also incorporates seamless integration with Quicken.com one of the most visited finance sites on the Web. The initial market response to Quicken 99 is encouraging, although it is too soon to assess the entire season. Internet Business Accelerates The growth of Quicken.com and Intuit's Internet businesses accelerated during the second quarter. Traffic reached record levels with January page views of 164 million, up 52% in the quarter and 270% from last January. In addition, approximately one out of every 25 people who used the Internet in December visited Quicken.com. Media Metrix measured this reach at 4.2%. The growth of Quicken.com has been key to attracting significant marketing and advertising deals. Thursday Intuit announced, in a separate release, that it had closed deals worth more than $60 million, over the next two years. Participating companies included Schwab, Datek Online, Discover Brokerage, and Sure Trade. Intuit's QuickenMortgage website also achieved two major milestones during the second quarter. First, in its first full year of operation, QuickenMortgage originated over $600 million in closed loans for the calendar year ended December 31. In addition, QuickenMortgage hosted over 900,000 visits in January, up 50% from a year ago. QuickenMortgage was the first multi-lender website to offer loans electronically throughout the entire United States and now features sixteen of the nation's top lending institutions. During the second quarter, Intuit's Quicken InsureMarket expanded its online auto insurance service. The number of consumer auto quote sessions tripled in the quarter. Combined with online access to a database supporting rates from 50 insurers nationwide, Quicken InsureMarket now offers multiple online quotes in states with more than 70% of the driving population. While the Internet presents many opportunities, Internet commerce revenue for fiscal 1998 was less than 10% of overall revenue. It is important that investors remember that potential Internet-related revenue and profits may be difficult to predict or achieve and may also be impacted by many factors including seasonal trends. In February, Intuit sold 450,000 shares of its holdings in Excite Inc. at an average net price of $94.13. At the same time the Company indicated that it had reached a financial decision to dispose of its remaining holdings over time as opportunities become available. "We felt that it was an appropriate time to recognize some of the gains from our investment," said Greg Santora, Intuit's Chief Financial Officer.